why so cheap compared to rio it , page-30

strong demand for australia's lng Running out of time to buy LNG
Nigel Wilson and Samantha Maiden
10jan06

CALIFORNIA may miss out on Australia's liquefied natural gas because other global customers are quickly locking up supplies.

The US state - one of the world's biggest economies - has been the focus of intense lobbying by gas producers in the past two years to overcome community and political opposition to shipments of LNG through an offshore terminal.

Speaking to The Australian ahead of talks tomorrow with US Energy Secretary Samuel Bodman, federal Resources Minister Ian Macfarlane warned California the world energy market was moving rapidly.

"I respect the process that Californian authorities are going through ... but they have to be aware that other markets are opening up and they may miss out," he said.

Mr Macfarlane said that when Australian companies such as BHP Billiton and Woodside began talking to Californian authorities about supplying LNG to meet the state's natural gas shortfall the price was about half what it is now.

"At current prices ... you could sail an LNG cargo twice around the world and still make a profit," Mr Macfarlane said.

At the weekend James Connaughton, President George W. Bush's adviser on the environment, said the US Government was throwing its weight behind efforts to secure Californian approval for "receival" terminals, which offload shipments of LNG for use in the local market.

Mr Connaughton will join Mr Bodman and Mr Macfarlane at talks this week on climate change and energy markets. California's energy needs - particularly its desire for "clean" fuels such as LNG - will certainly be raised.

Mr Macfarlane said it appeared likely that Australian LNG would first supply the US market through terminals being built in Mexico or by shipping through the Panama Canal to supply terminals on the US east and Gulf coasts.

He said Australian LNG - mostly from the giant fields off the northern coast of Western Australia - was being snapped up in Japan and Korea. Other deals were possible in India, Mexico and Chile.

Mr Macfarlane said the supply issue would be a key component of his discussions with Mr Bodman, who he had met last year at an International Energy Agency meeting in Paris.

"The bilateral meeting is important in the context of the six-nation climate change discussions because selling LNG to the US will help to demonstrate that real efforts are being made to reduce greenhouse gas emissions," he said.

The inaugural meeting of the Asia-Pacific Clean Development and Climate partnership in Sydney tomorrow will attract delegates from partner countries China, India, Japan, Korea and the US. It is not expected to set any specific targets to cut greenhouse gases, but Environment Minister Ian Mr Campbell said he was confident of delivering "constructive outcomes".

"I don't think anyone is going to expect some silver bullet to emerge from one meeting," he told ABC radio.

"We're still very hopeful of very constructive outcomes to deliver the two policy aims of robust economic development within the globe and within the six nations, but within a framework of tightly constrained carbon emissions, much lower greenhouse gas emissions. That's the policy goal."

Hundreds of protesters, who have dismissed the talks as a "political photo-op", are expected to target the two-day meeting, which will be hosted by John Howard.

US Secretary of State Condoleezza Rice has already withdrawn, citing the condition of Israeli leader Ariel Sharon.

Foreign Minister Alexander Downer will instead discuss climate change, regional security and the Middle East with Dr Rice today in Washington.